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Notes to the Financial Statements
For the fnancial year ended 31 December 2012
3. Summary of significant accounting policies (cont’d)
3.11 Impairment of non-fnancial assets (cont’d)
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGUs”) fair value less costs to sell and its value
in use and is determined for an individual asset, unless the asset does not generate cash infows that are largely independent of
those from other assets or group of assets. Where the carrying amount of an asset or cash-generating unit exceeds its recoverable
amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated
future cash fows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that
refects current market assessments of the time value of money and the risks specifc to the asset. In determining fair value less
costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available
fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each
of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations are generally covering
a period of ten years. For longer periods, a long term growth rate is calculated and applied to project future cash fows after the
tenth year.
Impairment losses of continuing operations are recognised in the consolidated statement of comprehensive income in those expense
categories consistent with the function of the impaired asset, except for assets that are previously revalued where the revaluation
was taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to
the amount of any previous revaluation.
For assets excluding goodwill, an assessment is made at each annual reporting period as to whether there is any indication that
previously recognised impairment losses recognised for an asset may no longer exist or may have decreased. If such indication
exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss for an asset other than
goodwill is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the
last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That
increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset previously. Such reversal is recognised in the consolidated statement of comprehensive income
unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.
3.12 Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the fnancial and operating policies so as to obtain benefts
from its activities.
In the Company’s separate fnancial statements, investments in subsidiaries are accounted for at cost less impairment losses.
3.13 Associates
An associate is an entity, not being a subsidiary or joint venture, in which the Group has signifcant infuence. The Group’s investment
in associates are accounted for using the equity method. An associate is equity accounted for from the date the Group obtains
signifcant infuence until the Group ceases to have signifcant infuence over the associate.
Under the equity method, the investment in associates is carried in the balance sheet at cost plus post-acquisition changes in the
Group’s share of net assets of the associates. Goodwill relating to the associate is included in the carrying amount of the investment
and is neither amortised nor individually tested for impairment. Any excess of the Group’s share of the net fair value of the associate’s
identifable assets, liabilities and contingent liabilities over the cost of the investment is included as income in the determination
of the Group’s share of results of the associate in the period the investment is acquired.
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